Why businesses must lead the race to net-zero emissions

In the fight against climate change, the world has reached a tipping point. More and more companies are waking up to the opportunities of a zero-carbon economy, but we urgently need to scale the endeavour to cement low-carbon practices along supply chains and across societies.

The prize is clear: by setting bold targets to phase out fossil fuels, cut waste and end deforestation; companies, cities and other non-state actors can send a powerful signal to governments around the world in support of strong climate policies. That vote of confidence will reinforce ambitions and increase the chances of success at the pivotal COP26 UN climate conference in November 2021.

The time for action is right now. If it had not been for the COVID-19 pandemic, governments would have met this week in Glasgow, UK, for those COP26 talks, with the aim of ensuring that the 2015 Paris climate accord delivers on its promise. The pandemic, which has destroyed so many lives and livelihoods, has delayed that agenda, yet global warming shows no signs of slowing.

Nonetheless, the worst health crisis in a century has given our economies a unique opportunity to rebuild and reset. What is more, the virus has prompted a growing realization that addressing the threats triggered by humanity’s despoiling of nature is a vital part of future business risk management. This has forced banks and other financial institutions to pay a lot more attention to the risks of inaction on climate change.

The good news is momentum is building. The Race to Zero campaign – a global alliance of businesses, cities, regions, investors and universities committed to achieving net-zero carbon emissions by 2050 at the latest – is on track to increase its membership at least tenfold between COP25 and COP26. It already groups more than 1,100 companies and nearly 500 cities and regions, alongside dozens of investors with more than $4 trillion of assets under management. All told, the alliance represents actors responsible for nearly 25% of global CO₂ emissions and more than 50% of GDP.

By adding more influential voices from across the global economy to this roll-call and building on the demand for action by citizens around the world, we can create a positive feedback loop in which governments on all continents are encouraged to take bolder steps. It is an aspiration that now looks more achievable following the pledge by US President-Elect Joe Biden to rejoin the Paris climate agreement next year.

The transformation of some industrial sectors is already occurring, with the most ambitious leaders in business agreeing to keep global temperature rises below 1.5℃ and some committing to reach net-zero by 2030 – 20 years ahead of the Paris target. The challenge now is to translate the stretch targets of the few into on-the-ground action of the many.

There are, of course, myriad paths to adopting a greener way of living in harmony with our planet, from the way people heat their homes and the food and consumer goods they buy to the modes of transport they choose to use.

My own country of Chile highlights both the opportunities and challenges. Last month, Chile launched an ambitious long-term, green hydrogen strategy to be fuelled by surplus renewable solar and wind capacity. This initiative could see Chile develop a major new export sector to rival copper while helping the nation achieve its CO₂ reduction goals.

As an entrepreneur running a winery and a recycling firm in Chile, I am committed to playing my part, but in order for the entire supply chain to deliver a green solution, we need a joined-up approach. For example, shipping a bottle of wine from our Polkura winery to London with net-zero emissions requires the decarbonization of shipping, road transport and packaging, which in turn relies on shifting to a renewable energy economy and transitioning from a linear to a circular approach in manufacturing.

Overall, an estimated 55% of the solution to the climate crisis will come from better energy systems and the remaining 45% from applying circular economy mechanisms to production and design. Achieving those goals across the continuum of energy supply, production and design will take collaboration, particularly between smaller businesses and multinationals.

Some big businesses are giving clear leads in specific areas. Danone and Walmart are embracing regenerative farming. Car-makers, including Daimler, the original developer of the internal combustion engine, are preparing for an electric transportation future. Many other corporations are also committing more broadly to a net-zero future. However, implementing all these strategies will require the participation of small and medium-sized enterprises (SMEs), as they will have to provide the net-zero goods and services along the supply chain.

To team up SMEs with big corporations to address the climate challenge is a big ask, but it will create huge opportunities for both sides. SMEs stand to retain market access and gain new business by meeting the climate expectations of their customers; while big firms have a chance to work with small, agile companies with cutting-edge ideas.

One thing is self-evident: the science of climate change is non-negotiable and the slower we are to act, the more complex and serious the effects will be. Now is the time to close the gap between ambition and action.